Testing for causality in variance in the presence of breaks

We examine the size properties of tests for causality in variance in the presence of structural breaks in volatility. Extensive Monte Carlo simulations demonstrate that these tests suffer from severe size distortions when such breaks are not taken into account. Pre-testing the series for structural changes in volatility is shown to largely remedy the problem.

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Year of publication:	2004-11-05
Authors:	Dijk, D.J.C. van ; Osborn, D.R. ; Sensier, M.
Institutions:	Erasmus University Rotterdam, Econometric Institute
Subject:	volatitilty \| causality tests \| structural change

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Extent:	application/pdf
Series:	Econometric Institute Report. - ISSN 1566-7294.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series RePEc:dgr:eureir Number EI 2004-48
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10004991097